Bank of America Raises S&P 500 Target Amid AI Sector Shift
Bank of America has raised its year-end target for the S&P 500 to 7,400 for 2026 and set a 12-month goal at 7,800. This adjustment reflects improved earnings forecasts—33% in 2026 and 12% in 2027—and marks the bank’s reversal of its bearish stance on AI-driven companies like Alphabet (GOOGL) and Meta (META). The Communication Services sector has been upgraded to marketweight, ending a previous underweight position that lasted over a year. The shift is tied to improving financial dynamics in cloud computing. BofA now expects cloud revenue at major hyperscalers such as Microsoft (MSFT), Amazon (AMZN), Alphabet, and Oracle (ORCL) to outpace capital expenditures by 2027. However, the bank remains cautious about off-balance sheet commitments and potential risks from private-market IPOs that could divert investor attention. For investors in S&P 500 index funds or target-date funds, BofA’s revised targets suggest modest returns rather than a significant rally. The firm favors hyperscalers over chipmakers at current levels due to stronger long-term earnings expectations and manageable debt structures.
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Topics: AI stocks Alphabet (GOOGL) Bank of America strategy Meta (META) S&P 500